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taxmap/pubs/p575-009.htm#en_us_publink1000227010

Relief for Midwestern Disaster Areas(p36)


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Relief for Midwestern Disaster Areas

See Tables 1 and 2 in Publication 4492-B, Information for Affected Taxpayers in the Midwestern Disaster Areas, for a list of the Midwestern disaster areas and the applicable disaster dates.
Special rules provide for tax-favored withdrawals, repayments, and loans from certain retirement plans for taxpayers who suffered economic losses as a result of the Midwestern severe storms, tornadoes, or flooding.
If you receive a qualified disaster recovery assistance distribution, it is taxable but is not subject to the 10% additional tax on early distributions (see the sections on Cost, Taxation of Periodic Payments, and Taxation of Nonperiodic Payments, earlier). However, the distribution is included in income ratably over 3 years unless you elect to report the entire amount in the year of distribution. You can repay the distribution and not be taxed on the distribution. See Qualified disaster recovery assistance distribution, later.
Form 8930, Qualified Disaster Recovery Assistance Retirement Plan Distributions and Repayments, is used to report qualified disaster recovery assistance distributions and repayments.
For information on other tax provisions related to these storms, tornadoes, or flooding, see Publication 4492-B.
taxmap/pubs/p575-009.htm#en_us_publink1000227014

Qualified Disaster Recovery Assistance Distribution(p36)


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A qualified disaster recovery assistance distribution is any distribution you received from an eligible retirement plan (see Eligible retirement plan earlier) if all of the following apply.
  1. The distribution was made on or after the applicable disaster date and before January 1, 2010.
  2. Your main home was located in a Midwestern disaster area on the applicable disaster date. For a definition of main home, see the Form 8930 instructions.
  3. You sustained an economic loss because of the severe storms, tornadoes, or flooding and your main home was in a Midwestern disaster area on the applicable disaster date. Examples of an economic loss include, but are not limited to:
    1. Loss, damage to, or destruction of real or personal property from fire, flooding, looting, vandalism, theft, wind, or other cause;
    2. Loss related to displacement from your home; or
    3. Loss of livelihood due to temporary or permanent layoffs.
If (1) through (3) above apply, you can generally designate any distribution (including periodic payments and required minimum distributions) from an eligible retirement plan as a qualified disaster recovery assistance distribution, regardless of whether the distribution was made on account of the severe storms, tornadoes, or flooding. Qualified disaster recovery assistance distributions are permitted without regard to your need or the actual amount of your economic loss.
A reduction or offset (on or after the applicable disaster date) of your account balance in an eligible retirement plan in order to repay a loan can also be designated as a qualified disaster recovery assistance distribution.
taxmap/pubs/p575-009.htm#en_us_publink1000227016

Distribution limit.(p37)


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The total of your qualified disaster recovery assistance distributions from all plans is limited to $100,000. If you have distributions in excess of $100,000 from more than one type of plan, such as a 401(k) plan and an IRA, you may allocate the $100,000 limit among the plans any way you choose.
taxmap/pubs/p575-009.htm#en_us_publink1000227017

Example.(p37)
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In August 2008, you received a distribution of $50,000. In 2009, you receive a distribution of $125,000. Both distributions meet the requirements for a qualified disaster recovery assistance distribution. If you decide to treat the entire $50,000 received in 2008 as a qualified disaster recovery assistance distribution, only $50,000 of the 2009 distribution could be treated as a qualified disaster recovery assistance distribution.
taxmap/pubs/p575-009.htm#en_us_publink1000227018

Taxation of Qualified Disaster Recovery Assistance Distributions(p37)


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Qualified disaster recovery assistance distributions are included in income in equal amounts over three years. However, if you elect, you can include the entire distribution in your income in the year it was received.
Qualified disaster recovery assistance distributions are not subject to the additional 10% tax (or the additional 25% tax for certain distributions from SIMPLE IRAs) on early distributions from qualified retirement plans (including IRAs). However, any distributions you receive in excess of the $100,000 qualified disaster recovery assistance distribution limit may be subject to the additional tax on early distributions.
For more information, see Form 8930.
taxmap/pubs/p575-009.htm#en_us_publink1000227019

Repayment of Qualified Disaster Recovery Assistance Distributions(p37)


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If you choose, you generally can repay any portion of a qualified disaster recovery assistance distribution that is eligible for tax-free rollover treatment to an eligible retirement plan. Also, you can repay a qualified disaster recovery assistance distribution made on account of a hardship from a retirement plan. However, see Exceptions later for qualified disaster recovery assistance distributions you cannot repay.
You have three years from the day after the date you received the distribution to make a repayment. Amounts that are repaid are treated as a qualified rollover and are not included in income. Also, for purposes of the one-rollover-per-year limitation for IRAs, a repayment to an IRA is not considered a qualified rollover. See Form 8930 for more information on how to report repayments.
taxmap/pubs/p575-009.htm#en_us_publink1000227020

Repayment of distributions if reporting under the 1-year election.(p37)


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If you elect to include all of your qualified disaster recovery assistance distributions received in a year in income for that year and then repay any portion of the distributions during the allowable 3-year period, the amount repaid will reduce the amount included in income for the year of distribution. If the repayment is made after the due date (including extensions) for your return for the year of distribution, you will need to file a revised Form 8930 with an amended return. See Amending Your Return, later.
taxmap/pubs/p575-009.htm#en_us_publink1000227022

Example.(p37)
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Alice received a $45,000 qualified disaster recovery assistance distribution on September 1, 2009. After receiving reimbursement from her insurance company for a casualty loss, Alice repays $45,000 to an IRA on March 31, 2010. She reports the distribution and the repayment on Form 8930, which she files with her timely filed 2009 tax return. As a result, no portion of the distribution is included in income on her return.
taxmap/pubs/p575-009.htm#en_us_publink1000227023

Repayment of distributions if reporting under the 3-year method.(p37)


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If you are reporting the distribution in income over the 3-year period and you repay any portion of the distribution to an eligible retirement plan before filing your 2009 tax return by the due date (including extensions) for that return, the repayment will reduce the portion of the distribution that is included in income in 2009. If you repay a portion after the due date (including extensions) for filing your 2009 return, the repayment will reduce the portion of your distribution that is includible in income for the year it was repaid, the excess may be carried forward or back to reduce the amount included in income for the year to which it was carried.
taxmap/pubs/p575-009.htm#en_us_publink1000227024

Example.(p37)
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Brian received a $90,000 qualified disaster recovery assistance distribution from his pension plan on October 15, 2009. He does not elect to include the entire distribution in his 2009 income. Without any repayments, he would include $30,000 of the distribution in income on each of his 2009, 2010, and 2011 returns. On October 30, 2010, Brian repays $45,000 to an eligible retirement plan. He makes no other repayments during the 3-year period. Brian may report the distribution and repayment in either of the following ways.
taxmap/pubs/p575-009.htm#en_us_publink1000227025

Exceptions.(p38)


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You cannot repay the following types of distributions.
  1. Qualified disaster recovery assistance distributions received as a beneficiary (other than a surviving spouse).
  2. Required minimum distributions.
  3. Periodic payments (other than from an IRA) that are for:
    1. A period of 10 years or more,
    2. Your life or life expectancy, or
    3. The joint lives or joint life expectancies of you and your beneficiary.
taxmap/pubs/p575-009.htm#en_us_publink1000227026

Amending Your Return(p38)


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If after filing your original return, you make a repayment, the repayment may reduce the amount of your qualified disaster recovery assistance distributions that were previously included in income. Depending on when a repayment is made, you may need to file an amended tax return to refigure your taxable income.
If you make a repayment by the due date of your original return (including extensions), include the repayment on your amended return.
If you make a repayment after the due date of your original return (including extensions), include it on your amended return only if either of the following apply.
taxmap/pubs/p575-009.htm#en_us_publink1000227027

Example.(p38)
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You received a qualified disaster recovery assistance distribution in the amount of $90,000 on September 15, 2009. You choose to spread the $90,000 over 3 years ($30,000 in income for 2009, 2010, and 2011). On October 15, 2010, you make a repayment of $45,000. For 2010, none of the qualified disaster recovery assistance distribution is includible in income. The excess repayment of $15,000 can be carried back to 2009. Also, rather than carry the excess repayment back to 2009, you can carry it forward to 2011.
File Form 1040X to amend a return you have already filed. Generally, Form 1040X must be filed within 3 years after the date the original return was filed, or within 2 years after the date the tax was paid, whichever is later.
taxmap/pubs/p575-009.htm#en_us_publink1000227028

Loans From Qualified Plans(p38)


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The following benefits are available to qualified individuals.
taxmap/pubs/p575-009.htm#en_us_publink1000227029

Qualified individual.(p38)


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You are a qualified individual if your main home was located in a Midwestern disaster area on the applicable disaster date and you had an economic loss because of the severe storms, tornadoes, or flooding. Examples of an economic loss include, but are not limited to:
taxmap/pubs/p575-009.htm#en_us_publink1000227030

Limits on plan loans.(p38)


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The $50,000 limit for distributions treated as plan loans is increased to $100,000. In addition, the limit based on 50% of your vested accrued benefit is increased to 100% of that benefit. If your main home was located in a Midwestern disaster area, the higher limits applied only to loans received during the period beginning on October 3, 2008, and before January 1, 2010.
taxmap/pubs/p575-009.htm#en_us_publink1000227031

One-year suspension of loan payments.(p38)


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Payments on plan loans outstanding on or after the applicable disaster date, may be suspended for one year by the plan administrator. To qualify for the suspension, the due date for any loan payment must have been during the period beginning on the applicable disaster date and ending on December 31, 2009.